In recent weeks, we’ve witnessed a dramatic change in routines for most industries globally. This has revealed a brand-new factor to business continuity – the flexibility to conduct business remotely. Despite lockdowns, the financial sector has continued providing services to consumers and businesses, supporting distressed economies and adjusting to the rapidly changing demands of their customers. A series of webinars, hosted online by Innovate Finance this year, has revealed several emerging trends within the space. One of the most intriguing tendencies is the forced shift towards digital services among consumers and small-to-medium enterprises (SMEs). Financial technology has become instrumental for supporting people in their daily economic decisions, affording providers of digital offerings an unprecedented opportunity to deliver and build trust. We believe, therefore, that this change is likely to have a lasting impact on the industry in the aftermath of the pandemic.
Before we explore the massive increase in adoption of digital financial offerings, it is useful to look at how financial innovators responded to the pandemic holistically. One of the highlights of the webinar “COVID-19: Navigating the New Reality II” was Deloitte’s presentation of the identified challenges, mitigation measures and the general sentiment in the UK’s emerging financial tech sector. According to the research, the industry has seen a substantial increase in the use of mobile payment platforms as businesses adapted to the contactless reality of the lockdown. Within the sphere of B2C offerings, the analysts have noted substantial growth in peer-to-peer lending platforms. Moreover, there has been an increase of utilisation of trading platforms as the economic impact of the outbreak led to a volatility surge in financial markets. Additionally, the subsector of the emerging B2B providers catering to large incumbents tends to carry on business as usual, despite their customers’ likely preoccupation with the outbreak. Deloitte’s analysis suggested that due to border closures, foreign exchange services and other offerings travel businesses were experiencing harder times. Overall, the UK’s capacity for financial innovation has been able to deliver critical support for the economy with a great deal of speed, flexibility and creativity, maintaining an optimistic outlook about their roles in the post-pandemic economy. There seems to be a growing consensus that the new economic reality will integrate a much higher degree of technological adoption and increased levels of trust in automated financial planning.
How does the accelerated adoption of digital solutions build this trust? Various examples highlight the ability of digital financial offerings to empower consumers to get through the hardship of the pandemic using technology – from receiving remote financial support from loved ones to accessing financial services online by the elderly. The Innovate Finance webinar on financial inclusion uncovered many more inspiring stories of how digital products are supporting the community during the outbreak. For instance, Wagestream, an app allowing workers to access their salaries as they earn them, revealed that their services were quickly repurposed to offer extra support to their customers during the outbreak. For example, some of the new features enable employees to get their furlough payments promptly and to receive immediate overtime payment with no associated fees. This is vital for healthcare workers who are at the frontlines of the pandemic. Gohenry, the pocket money app teaching children to operate in the modern financial world under supervision, shared a great example of how digital services are becoming a part of the childhood experience. Some of its features assumed the role of a new communication channel between children and their families. For example, gohenry’s giftlink functionality has seen a five-fold increase in use during the outbreak as children have moved on to receive birthday presents from their loved ones digitally.
Social distancing has undeniably changed the daily routines of most banking customers, encouraging them to adjust their behaviour to a new reality. This new world has prompted people to look for novel solutions to mundane issues, which would have to go beyond stickiness of habits and fear of the unknown. We see that due to their efficiency, low cost and tremendous flexibility, digital financial offerings are finally receiving the recognition they deserve from customers. This has manifested itself in the accelerated adoption of digital financial services reported by the global FinTech community – and there is untapped potential to unlock in collaborations between established players and FinTechs. That said, we believe that in the new world that is emerging, delivering reasonably priced and high-quality services for customers will remain to be an essential factor in building long-term trust capital. Therefore, it is vital to devote enough attention to reliability, security and performance of the underlying technology driving digital offerings.